Cramer Remix: How drug stocks fulfilled their destiny without Trump
Many investors assume that President Donald Trump's meeting with pharmaceutical executives back in January is behind the tremendous run that these stocks have had, but Jim Cramer pointed to something else.
"Let's recognize that some moves are simply related to bonds, and bonds aren't in the grips of the economy, they are being driven by this bizarre shortage of bonds from the developed world," the "Mad Money" host said.
Short sellers built up positions ahead of the meeting with Trump, betting that the stocks would go down afterward. After all, Trump had campaigned against outrageous sums that the U.S. government paid drug companies.
But the drug companies came to the table with powerful statistics surrounding employment, and after the meeting Trump began praising the executives and moved on to the next group. But just because the group bottomed, doesn't mean that explains the rally.
When Cramer studied the gains of Merck (NYSE: MRK), Eli Lilly (NYSE: LLY) and Pfizer, (NYSE: PFE) he discovered that they simply rose because they were bond market equivalents. High-yielding dividend stocks followed bonds. As the bond prices rose and bond yields fell, investors crowded into them for income.
Cramer witnessed the most violent contrast in earnings he has seen in ages on Tuesday when Domino's Pizza (NYSE: DPZ) crushed estimates, while Target (NYSE: TGT) gave a forecast that was far worse than expected.
These two stocks are a perfect metaphor for the current environment of the stock market, thanks to what Cramer calls the " stay-at-home economy ."
This refers to thriving stocks — such as Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX) and Domino's — that allow people to stay at home and save money.
Domino's delivers pizza and can be accessed from almost every device to order from home. Target requires people to leave the house and go to the store. Its prices aren't anything special, certainly not what they can get from Amazon, which delivers right to its customer's door for free if they are an Amazon Prime member.
"We have to question the entire relevance of Target, particularly if prices go up 20 to 25 percent … Three-year plan? How about a survival plan. There is no long-game anymore," Cramer said.
As the market eagerly awaits the IPO of Snap, the parent company of the popular Snapchat app, Cramer reviewed his playbook for investors to make a move at the right time.
"I totally get where the bears are coming from, but I believe that, at least initially, the bulls are going to triumph here, and they could potentially keep winning for a whole lot longer than that," the " he said.
A typical daily average user of Snapchat visits the app more than 18 times a day for about 20 to 30 minutes of total activity. With the astounding 158 million people that use Snapchat, there are more than 2.5 billion snaps a day. According to Snapchat, the average user age ranges from 18 to 34 years old.
While the online lending space has become a difficult place to be, SoFi is a privately held company that Cramer said is the one doing it right.
SoFi started as an online lender that would refinance student loans taken out by graduates of elite universities, and has since expanded to personal loans, mortgage lending, asset management and life insurance.
SoFi's business model is customized to offer customers career advice and even offers dating events to keep customers engaged. It has no fees, and its lending process has been simplified online. In just six short years it has funded $16 billion in loans, and just closed on a $500 million round in funding.
Cramer spoke with SoFi's co-founder and CEO Mike Cagney, who explained what makes the company different.
"It's really the opportunity to reinvent how financial services work. It's the idea to bring speed, transparency and alignment into the equation. And that's what's missing today," Cagney said.
Shares of Salesforce (NYSE: CRM) fell in after-hours trading on Tuesday after the company reported a robust quarter, but forward guidance was lighter than Wall Street expectations .
Co-founder and CEO Marc Benioff explained the conservative guidance to Cramer, citing a shift in the foreign exchange atmosphere. In September, Benioff also pointed to foreign exchange headwinds for weaker forward guidance back in September, due to Brexit and said it resulted in a loss of $150 million in revenue.
"We just reported an unbelievable year. But our results can be tempered by the foreign exchange environments. So we are appropriately conservative when we give you those numbers," Benioff said.
In the Lightning Round , Cramer gave his take on a few stocks from callers:
Southwestern Energy Company (NYSE: SWN): "You are buying it betting that it's going to get real hot this summer because the fact is, it did not work this year because it was just too hot in the winter. And that's why that stock has gone down along with the whole group."
NetApp (NASDAQ: NTAP): "It had a monster quarter and I think the stock can go higher. I really liked that quarter. Everything about it."
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